The recent unveiling of a proposal to introduce revamped tax benefits and expand Hong Kong SAR of China’s network of tax treaties mark the latest efforts to elevate the Special Administrative Region’s appeal as a globally competitive corporate treasury centre (CTC) hub.
Built around a ‘4T’ framework – tax revamp, tax agreements, targeted promotion and talent and dialogue, the Hong Kong Corporate Treasury Centre Development Action Plan puts forward a list of proposals that expand on the existing preferential 8.25% profits tax rate and various interest deductions.
Greater certainty
Noting how companies and CTCs appreciate certainty, tax experts point out that by replacing the strict and complex requirements of the 2016 tax regime with pre-approvals and broader deductions, the proposed reforms reduce corporate tax burdens, streamline operations and improve certainty. Many in Hong Kong SAR’s accounting community describe the proposed new measures as potentially a ‘game changer’. At government level, the action plan aligns with the aims of the Chinese mainland’s 15th Five-Year Plan and the SAR’s first-ever local five-year development plan, which is currently undergoing public consultation.
Amid global geopolitical turmoil, Hong Kong SAR provides a stable environment
Jointly spearheaded by Financial Services and the Treasury Bureau, the Inland Revenue Department, the Hong Kong Monetary Authority and InvestHK, the action plan addresses tax and regulatory pain points and streamlines how multinational groups manage funds. Elaborating on the topic during a radio interview, Christopher Hui, secretary for Financial Services and the Treasury, said that while tax concessions have been available for CTCs in Hong Kong SAR for a decade, a number have made it clear that these are less attractive than those in other markets, and are also seeking greater certainty.
Skills demand
While the proposed initiatives are not expected to be legislated until the first half of 2027, professional services practitioners see the potential for positive outcomes. For example, as more corporate treasury centres are established, skilled professionals in finance and treasury management will find increased demand for their expertise.
When it comes to deciding where to establish a CTC, the experts note that real estate’s principle of location, location, location also applies when setting up a CTC operation. This is an area, they say, where Hong Kong SAR holds a number of advantages. While other CTC jurisdictions also offer competitive advantages, corporate treasury experts believe that the market ticks many of the boxes.
Hong Kong SAR holds the unique advantage of seamless crossborder connectivity
Underpinned by a comprehensive financial ecosystem, which is home to more than 70 of the world’s top 100 banks, Hong Kong SAR operates under a transparent, globally aligned common-law framework. Amid global geopolitical turmoil, the SAR provides a stable environment for managing crossborder cash, foreign exchange and working capital across the Asia-Pacific region.
Stepping-out platform
Meanwhile, Hong Kong SAR is unchallenged as the preferred stepping-out platform for Chinese mainland firms expanding globally. International CTCs choose to establish operations there because of its business-friendly tax policies and its position as a gateway to the Chinese mainland. Importantly, there is a deep talent pool of professionals who understand both Western financial standards and Asian business practices.
Chinese mainland corporates across sectors including carmakers, energy and retail have established CTCs to support their international growth.
With the unique advantage of seamless crossborder connectivity with the Chinese mainland, Hong Kong SAR allows a free flow of capital. It is also the world’s largest offshore renminbi hub, which provides CTCs with a reservoir of liquidity and hedging options. With all that on offer, there is a lot of incentive for multinational corporations to centralise their fund management, asset allocation and risk management in one Asian location.
